Vehicle pricing considering EVs promotion and public transportation investment under governmental policies on sustainable transportation development: The case of Norway

Abstract

The present research investigates the advancement of sustainable transportation by promoting electric vehicles, expanding public transit, and implementing tax increases on fossil fuels and automobiles, via crucial strategies. The present study has examined a market with a fossil fuel vehicle (FFV) manufacturer, an electric vehicle manufacturer, and the government. The manufacturers' pricing strategies are geared towards optimizing profits, whereas the government's objectives for transportation are centered on attaining sustainability across economic, environmental, and social dimensions. The government has considered two strategies, one taxation-based and the other non-taxation-based, to achieve its objectives. In the taxation-based strategy, fixed taxes on fossil-fuel vehicles and fossil fuels are considered, while in the non-taxation-based strategy, subsidies for purchasing electric vehicles and the number of buses purchased for public transportation are predefined. Based on this, eight scenarios with different values for the predefined factors of each strategy have been defined to attain their respective objectives. Game theory has been utilized to determine an optimal solution based on Norwegian data, owing to the interconnected decision-making among stakeholders. By analyzing the findings, managers can enhance their decision-making capabilities. The results suggest that appropriately adjusting subsidies, taxes, and bus numbers within specific thresholds is crucial for mitigating air pollution and achieving other objectives. The assertion that electric cars are a definitive solution may not be accurate, as it depends on the source of the generated electricity. While excessive subsidies in non-renewable energy countries can lead to increased pollution, even in Norway, where most electricity is renewable, rising demand for electric vehicles contributes to air pollution due to increased production. In countries where electricity generation is not primarily from renewable resources, the growth of electric vehicles further exacerbates pollution.Simultaneous increases in fuel taxes and tariffs on fossil fuel vehicles negatively impact the demand for fossil fuel vehicles and government revenues. Therefore, it is recommended that an increase in fuel taxes be implemented to optimize both government revenues and social welfare. This approach safeguards public revenues, promotes societal well-being, and mitigates air pollution.